Chinese demand fuels coal boom

STRONG demand and prices for Australian coal from the Chinese market will continue to drive investment and development in the resources industry, according to economic analysts.
Chinese demand fuels coal boom Chinese demand fuels coal boom Chinese demand fuels coal boom Chinese demand fuels coal boom Chinese demand fuels coal boom


Staff Reporter

In recent reports from the Reserve Bank of Australia and Access Economics figures show substantial increases in coal investment and new projects when compared to the previous year.

Nationally, investment in coal projects under construction was up 72.9% on the previous year with a further 16.2% increase in investment for future projects.

This was driven by major mining and infrastructure projects including the new $A400 million Korea Resources Crop/ Sojitz Corp Wallarah longwall mine in NSW and Queensland's $1.1 billion Dawson Project, south-west of Gladstone, Rio Tinto's $950 million Clermont mine and the $700 million Lake Lindsay project in the Bowen Basin.

Accommodating these high profile projects were vast spending on Queensland's ports and rail network including the $800 million expansion of the RG Tanna Coal Terminal in Gladstone and the $530 million first stage of the Dalrymple Bay Coal Terminal in a bid to ease bottleneck supply issues.

In New South Wales the first stage of the expansion of the Kooragang Island coal terminal at the Port of Newcastle has been completed and major mining projects, including Excel Coal's Wilpinjong open-cut coal mine in Mudgee and the development of the Ashton mine near Singleton, have been completed.

The Access Economics quarterly report reports a 7.1% investment in the mining industry nationally.

While other commodities are suggested to be verging on a slowing down period, increasing demand for local coal from China, Australia's largest overall trading partner as of this month, is expected to support the boom, at least for a few years.

Access, however, warns China's lack of economic management and infrastructure deficiencies could see the country's boom period end as soon as 2009 while the Reserve Bank is confident the country's economy will remain strong well into the future.

So strong in fact that the RBA expect contract prices to rise by around 15% in 2008 because of the Chinese demand, with consensus growth figures for the country at 10.4% for 2007.